Oil bath compressors (they have an oil sump just like most car engines) are indeed quieter, much quieter, and they last a lot longer. You have to change the oil in them about once a year, but that's all. The price you cite for a compressor of that size is a very good price. Around here it would sell used for $150~maybe $200. There is one problem with oil bath compressors. Its the oil. It gets into your air. Now if you plan to just use air tools that's no problem at all, in fact its a good thing. But if you paint then you have to filter it out or suffer the consequences. Now I don't mean they squirt out oil, no , nothing like that - but they do fling out enough to put fish-eyes in paint jobs, and that can be a very expensive problem to fix.
As for the oilless compressors, they are real good if you're a carpenter and are running a nail gun off of it, but if you plan to do any serious mechanicing, even now and then, then oil bath is what you want.